The charm of a chama

I am currently based in Nairobi, Kenya, as a Fellow of the ILO’s Impact Insurance Facility, hosted by MicroEnsure. I provide technical inputs and project management support for the Facility’s innovation project with the partner. My recent work has included using claims data to improve their hospital cash product.

This post focuses on my personal experience of joining a Kenya chama — an ideal platform to distribute micro-insurance products. Chama, meaning “group” or “body” in Kiswahili, is an informal micro-saving group where individuals pool and invest their savings together. The chama phenomenon arose during the economic struggles of the late 1980s in East Africa. It grew out of the idea of harambee, which means “all together”. Initially, chamas tended to be welfare groups exclusively for women. However, as the idea matured over the years, men also began to participate. Members contribute an agreed amount of money with the goal of helping each other grow economically and possibly achieve financial independence. In Kenya, it is estimated that there are more than 300,000 chamas controlling a total of Ksh 300 billion (USD $3.0 billion) in assets[i]. Some even estimate that 1 in every 3 Kenyans are chama members[ii].

The majority of chamas operate according to a system known as “merry-go-round”, in which a fixed amount of money is collected from the group members and given out to a certain member on a rotating basis. This process is repeated until all members get their share. This structure relies on trust between all members, and for this reason chamas are known for their exclusivity.

During my Impact Insurance Fellowship in Kenya, I had the privilege of joining a chama group with 11 beautiful African ladies. My first chama meeting, held at the house of one member, started with the delicious smell of the Kenyan classic dish nyama choma (barbecued meat) and a huge table filled with Kenyan specialities. Yet, before we enjoyed the Kenyan cuisine, the group first discussed the topic that had brought them together: their investments. The treasurer announced the financials and the saving amount each individual member had made to the group. Then we turned to what is known as “table banking”. Table banking involves giving out loans to members using the money collected, based on the individual saving amounts held within the group. These loans will be charged at an interest rate (generally varying between 10 to 30% per month). In this way, the pool of money within the group also accumulates with interest. Like many other chamas, this self-help group has the goal of financial independence and social welfare amongst women. The money saved from the chama can assist members when they fall sick or be used to support one another with home restorations or buying livestock or utensils.

Yet what drives this informal cooperative society is a strong sense of group membership and friendship. Most chamas are groups of former classmates, colleagues at work, neighbours, friends and relatives. The notion of “sisterhood” — of a group of women walking together on their life journeys — was emphasised. There is no doubt that this chama group which I am privileged to be part of is a precious friendship group which provides social support during times of need. To me, the very charm of a chama is to invest collectively with your friends and to have fun while you’re at it!

[i] “The Chama Handbook 2016 (3rd edition)”, Kenya Association of Investment Groups The Chama People, kaig.org. 2016

[ii] “Standard Digital News — Kenya: Chama revolution: Banks train sights on investment clubs”. Standardmedia.co.ke. 2013–06–03